DMO launches high-yield savings bonds for Sept, as rates soar to 18.202%

The Federal Government of Nigeria, via the Debt Management Office (DMO), has launched a fresh round of Federal Government of Nigeria (FGN) savings bonds for September 2024, offering attractive yields that reflect the current high-interest environment.

Investors have until September 6th to subscribe to these bonds, which feature some of the most competitive rates seen in recent years.

This month’s offering includes a two-year bond with a yield of 17.202 per cent and a three-year bond yielding 18.202 per cent, both significantly higher than the rates offered in previous years. For comparison, the interest rate for FGN savings bonds in September 2023 was set at 12.031 per cent, underscoring a sharp increase of 6.17 percentage points in just one year.

This surge in interest rates is closely tied to the Central Bank of Nigeria’s (CBN) aggressive monetary tightening, aimed at combating persistent inflation and stabilising the foreign exchange market.

Since February, the CBN has raised the benchmark interest rate by 800 basis points across four consecutive Monetary Policy Committee (MPC) meetings. These actions have made FGN savings bonds increasingly attractive to investors seeking higher returns, and have spurred significant demand in the bond market.

The impact of rising yields was evident in the August 2024 bond auction, where investor enthusiasm was notably strong.

The government successfully raised N374.751 billion, well beyond its initial target.

The auction featured three distinct bonds with tenors of 5 years, 7 years, and 9 years, marking a crucial step in Nigeria’s efforts to secure funding for ongoing national projects,  notably, the nine-year bond was a standout, drawing in subscriptions of N375.083 billion, far exceeding the offered amount of N50 billion.

The bond was allotted N314.213 billion at a marginal rate of 21.50 per cent, an oversubscription of 650.17 per cent demonstrating the high appetite for longer-term securities.

The minimum subscription for these savings bonds remains accessible, starting at N5,000, with each unit priced at N1,000. Investors can subscribe in multiples of N1,000, up to a maximum of N50 million. Interest payments are scheduled quarterly, with the first payout set for December 11, 2024.

Settlement is planned for September 11, 2024, with quarterly coupon payments scheduled for December 11, March 11, June 11, and September 11.